Foreign investors net purchased 66.1 billion won worth of stocks on the KOSPI market on the 5th of this month. Foreigners showed a selling advantage but turned into 'buyers' on Oct. 4 and Nov. 4 last year, Dec. 3, and Jan. 6 this year. This became a driving force behind the rise of the KOSPI index on the same day.
These dates all followed the announcement of the manufacturing Purchasing Managers' Index (PMI) by the Institute for Supply Management (ISM) in the U.S. ISM conducts surveys of about 400 corporations' purchasing and supply managers every month before releasing the manufacturing PMI. A PMI below the benchmark of 50 indicates contraction in the economy, while a reading above that signals expansion.
The ISM manufacturing PMI has shown an upward trend since hitting a low of 46.5 in October last year (announced in November). The manufacturing PMI for February released this month came in at 50.9, surpassing the market forecast of 49.3. This is the first time it has exceeded 50 since March last year (announced in April).
U.S. manufacturing conditions are evaluated positively, but why do foreigners buy Korean stocks? This is because ISM's manufacturing PMI closely correlates with Korean exports, especially in the semiconductor sector. As U.S. manufacturing companies assess conditions as expanding, they also increase new orders and production, leading to higher semiconductor demand. The manufacturing PMI typically moves 1 to 2 months ahead, which results in increases in Korean export growth rates and earnings per share (EPS) in the semiconductor sector.
Lee Eun-taek, a researcher at KB Securities, noted, “Most of the corporations surveyed for the ISM manufacturing PMI are B2C (business-to-consumer) corporations, so an increase in PMI indicates a rebound in the B2C market,” adding, “This greatly affects general-purpose semiconductors related to durable consumer goods like PCs.”
The researcher further stated, “Looking at the recent detailed indicators of the ISM manufacturing PMI, new orders and export orders surged while inventories actually decreased,” suggesting that there would be demand for inventory restocking in the first half of the year.
If the ISM manufacturing PMI continues its upward trend, the likelihood of foreigners changing their stance on selling Samsung Electronics could increase. Foreigners have net sold more than 23 trillion won worth of Samsung Electronics stocks from August last year to this month.
Of course, it cannot be expected that net purchasing by foreigners will continue solely based on the ISM manufacturing PMI. There are many investors concerned that investments in artificial intelligence (AI) following the launch of a cost-effective AI model by the Chinese AI startup DeepSeek may not be as substantial as anticipated, and the 'tariff war' raised by U.S. President Donald Trump is also a source of instability. Additionally, political uncertainties persist in Korea due to the presidential impeachment situation.
One notable point among the detailed indicators of the ISM manufacturing PMI is that prices have risen to 54.9, which could be a burden in terms of inflation. Jin-kyung Lee, a researcher at Shinhan Investment Corp., remarked, “Increasing upward pressure on prices for goods is a concern,” and noted that in the corporate survey, material cost pressures were mentioned, particularly concerning chemicals and steel.
While it is difficult to predict the direction, given the significant impact of foreign buying trends and semiconductor conditions on the KOSPI index, we should monitor the ISM manufacturing PMI released at the beginning of each month.